disgruntledtoons

The housing bubble in China is also a repeat of the US stock market bubble leading up to the 1929 crash and the resulting depression. America's central bank had hit on the idea that maintaining low interest rates would produce a perpetual boom economy. This led to lots of borrowing which led to lots of bad investments and lots of speculation in stocks by people who had no idea what they were doing. The comedian Groucho Marx discussed this in his biography, and he wrote that he lost about two years' income in the crash. China clearly blamed it all on the greed of capitalists, told themselves that they would never have the same problem, and did the same thing and are now getting the same results.

Actually, the Chinese housing investments are more like the US 1929 stock investments. People borrowed money go buy stock, then the stock tanked, and they lost everything. This led to the great depression. China is on the edge of a great depression since many housing projects are seriously unfinished, empty, or built so poorly that they are practically unlivable. Add to this problem that the local governments, many of whom have bonds coming due in the next couple of years for high speed rail costs, were counting on the land sales/leases to generate 2r-30% of their revenue. HSR is losing MILLIONS EACH DAY so their is no savior there. Now the banking scandal is out in the open, with corruption at the base. Add to that the multiplied loans and you have a perfect financial storm. Oh, consider that many foreign companies have moved their manufacturing to other countries, 1700 companies just from Japan, and the resulting unemployment realistically prevents people from paying their mortgage. Two major differences between US housing sales, and China housing sales is A) in China you pay the entire purchase price up front, even before the first shovel of dirt is turned, and 2) the bank does not have a "mortgage" on the property since it actually may not exist. Therefore, the banks do not hold the builder accountable. I don't see a way out of this for the CCP since the numbers are in the trillions, and simply too large to cover.

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